As widely expected, airlines in Korea suffered badly in the first quarter as a result of the collapse in travel demand with the coronavirus pandemic. Losses were mitigated by an increase in demand for cargo shipments, but not a lot.
Full-service carriers suffered more than 20 percent declines in revenue in the first quarter and budget carriers up to a 50 percent dip.
In a preliminary earnings report, Korean Air Lines on 15th May reported a 692 billion won (US$562 million) net loss, 674 percent up from 89.4 billion won in the first quarter last year. Revenue declined 22.7 percent on year to 2.35 trillion won.
The operating loss for the first quarter was only 56.6 billion won (compared to a 238.4 billion won profit a year earlier) because operating expenses were much lower with so many staff on unpaid leave and lower oil prices, according to Korean Air Lines.
It was the first operating loss for the airline since the second quarter of 2015, when it reported a 19.56 billion won operating loss.
Revenue passenger kilometers, a measure of demand, fell 29.5 percent as demand for flights nosedived, but freight ton kilometers inched up 3.1 percent.
The national airline said the red ink is expected to continue in the second quarter. But it expects domestic travel demand to gradually recover centering on flights to Jeju Island as the number of coronavirus patients stabilize in Korea. It also predicted that restrictions on travel abroad will ease after May.
“We are truly grateful for the support of the government and the state-run banks. Although the challenge has been inevitably caused by the external environment, we will do our best to work on turnaround measures and take it as an opportunity to reform,” said Korean Air Lines President Woo Kee-hong in a statement.
The airline plans to resume international routes starting next month. Of its 110 international routes, it is still flying 13 and will resume 19 next month.
On the same day, Asiana Airlines reported expanded losses on decreased revenue in the first quarter for the same reason.
Its net loss stood at 549 billion won, a 551.25 percent increase from the 84.3 billion won net loss a year earlier. Its operating loss expanded 1,664 percent to 208.2 billion won from 11.8 billion won during the same period a year ago. Revenue dipped 21.5 percent on year to 1.13 trillion won.
Asiana also saw demand for cargo shipments increase, particularly for IT products like semiconductors and computers.
Starting in June, Asiana Airlines plans to resume flights to the United States, Southeast Asia and China. 13 international flights will be resumed.
Asiana’s budget subsidiary Air Busan’s net and operating incomes both went into the red on sales that declined almost 50 percent.
Air Busan on Friday reported a 61.77 billion won net loss from a 1.89 billion won net profit in the same quarter last year. It reported a 38.51 billion won operating loss compared to a 5.49 billion won operating profit during the same period last year. Sales plummeted 46.47 percent to 93.14 billion won.
Korean Air Lines’s budget affiliate Jin Air reported a 45.8 billion won net loss in the first quarter from a 31.8 billion won net profit in the same period last year. Its operating income went into the red to the tune of 31.3 billion won compared to a 50.9 billion won operating profit last year. Revenue dipped 50 percent to 143.9 billion won.
Another budget carrier, T’way Air, also went into the red.
T’way Air on Friday reported a 34.81 billion won net loss compared to a 20.13 billion won net profit in the same quarter last year. It reported 22.3 billion won in operating losses, from 37.31 billion won in operating profits last year. Sales slid 38.13 percent to 149.18 billion won.
“The first-quarter performance is just a signal of how bad it could be for airlines in the second quarter because demand for flights started plummeting in March. For airlines, spacing out passengers on flights for social distancing will help lift demand for international routes when they resume next month,” said Prof. Choi Jeong-chul, who teaches at the Graduate School of Manufacturing Innovation at Inha University.
(Source: Korea JoongAng Daily)